It’s been a while since my lone "small cap feature" post, but I recently received a proxy voting form and annual report from NutraCea and I wanted to share the stock with you all. A few things first. I have to give myself props for the previous
small cap post on On2 Technologies (AMEX: ONT). I recommended it prior to its March earnings announcement at around $1.24. It ended up selling off and I reaffirmed my strong bullish opinion on the stock. It currently sits at $3.42 and has been as high as $3.99 not too long ago (note: I did move out early of the stock, but you can see that if you follow the lengthy comments thread). In any event, the lone On2 post has been such a strong driver of traffic to the site that I am eager to post on NutraCea.
NutraCea is probably not a new idea in the blog world, and many of you may have heard of it. First, as was implied above, I am a shareholder. NutraCea is "is a health science company having intellectual property that allows it to process and convert rice bran into a nutritious ingredient that has applications as an ingredient in various food products and as a component of formulations that have applications for treatment modalities in nutritional supplementation and as stand alone products that can be sold through non-related entities with distribution into the market place."
A few things to make this clear:
1) 2/3 of the entire world is sustained by rice;
2) Rice bran is the most nutritional part of the staple (110 antioxidants and cofactors, high quantities of water and fat-soluable vitamins, various minerals beneficial to your health, balanced level of fat and protein);
3) Current milling (conversion to white rice) renders rice bran a worthless byproduct;
4) NutraCea’s technology stabilizes rice bran leaving nutritional value intact and usable
NutraCea has three main markets: 1) Animal nutrition (ADM and Purina are customers), 2) Secondary market (US consumer finished goods) products (nutraceuticals); and 3) Humanitarian causes/developing world governments.
In my mind, this leaves the company with an impressive competitive advantage and the potential for margins unknown in its industry. Just think- there is a byproduct of the magnitude of RICE that is being virtually wasted. This has tremendous implications for not just the potential profit of this company, but also the nutrition of the developing world.
Do some DD on this stock and see what you think. I am waiting for some consolidation or a movement upward to purchase more this stock. It has been hit pretty hard the past two weeks, we need to make sure that we have found somewhat of a bottom (but be careful this has been very volatile).
I do have two concerns: 1) while the company is virtually debt free, they have done so by issuing a ton of stock and warrants — dilution is still a concern; 2) I have little faith in its current CEO to take this company to the next level and without significant leadership improvements in the past few months, I would not be in this stock.
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